UK ends tariffs on US rum, vodka and brandy

The UK government said it would suspend the tariffs that the EU imposed on US$4 billion of US goods as part of the long-running Airbus and Boeing dispute, signalling good news for rum, vodka, brandy and vermouth.

The trade war between the European Union (EU) and the US is part of a 16-year dispute between aircraft manufacturers Airbus and Boeing. In 2019, the US government imposed tariffs on US$7.5bn worth of EU goods, including single malt Scotch and single malt Irish whiskey, because of the ongoing disagreement.

In October this year, the World Trade Organization (WTO) sanctioned the EU to impose tariffs on almost US$4bn worth of US products, including a 25% import tax on rum, brandy, vodka and vermouth from the US.

The UK’s one-year transition period since leaving the EU comes to an end on 31 December 2020. In an effort to show the UK is ‘serious about reaching a negotiated outcome’ regarding the Airbus and Boeing dispute, the UK government intends to drop the tariffs.

However, in order to protect the UK steel industry, the 25% retaliatory tariff on American whiskey will remain. The tariff was introduced by the EU in response to outgoing US president Donald Trump’s introduction of a 25% tariff on steel and 10% tariff on aluminium imported into the US.

Liz Truss, international trade secretary for the UK, said: “As an independent trading nation once again, we finally have the ability to shape these tariffs to our interests and our economy, and to stand up for UK business.

“Ultimately, we want to de-escalate the conflict and come to a negotiated settlement so we can deepen our trading relationship with the US and draw a line under all this.

“We are protecting our steel industry against illegal and unfair tariffs – and will continue to do so – but are also showing the US we are serious about ending a dispute that benefits neither country.”

The gesture by the UK towards the US regarding tariffs has been welcomed by trade body the Scotch Whisky Association (SWA), which has long campaigned for the removal of tariffs on both sides of the Atlantic.

The trade disputes have resulted in a 30% fall in Scotch whisky exports to the US over the last year because of the 25% tariff on single malt Scotch since October 2019.

In October this year, 18 trade groups wrote a joint letter calling for the urgent removal of tariffs on spirits after American whiskey exports to the EU plummeted 41%.

Karen Betts, chief executive of the SWA, said: “The US government’s removal of Airbus retaliation on Scotch could, in turn, justify the UK removing tariffs on US whiskey under the steel and aluminium dispute.

“Moves such as these pave the way for both governments to intensify efforts to reach a final resolution to both the Airbus/Boeing and steel and aluminium disputes, which have caused real disruption to businesses and raised costs for consumers in both countries.

“It is encouraging that the UK government is making use of the flexibility of an independent trade policy to help find solutions to issues that, in Scotch whisky’s case, are damaging our global exports. We hope that this marks the beginning of the end of trade tensions with the US.”

American whiskey exports to UK down 55%

Trade body the Distilled Spirits Council of the US (Discus) said the move presented a “hopeful sign that a resolution to the debilitating tariffs on US and UK spirits may be in reach”. Discus also reiterated the importance of returning to zero-tariff trading, highlighting a 55% drop in American whiskey exports to the UK since tariffs were introduced in 2018.

In a statement, Discus said: “We urge the United States to seize this opportunity to intensify its engagement with the UK to settle the WTO Boeing/Airbus disputes as well as the Section 232 steel and aluminium tariffs.

“We call on the US and UK to build on this positive momentum by eliminating the UK’s retaliatory tariff on American Whiskey and US tariffs on single malt Scotch, single malt Irish whiskey from Northern Ireland and liqueurs and cordials. Since the EU’s 25% retaliatory tariff went into effect in June 2018, American Whiskey exports to the UK, our second largest American Whiskey export market, have tumbled by 55%.

“As the new year approaches, we urge both the US and UK to seek a fresh start to trade relations by immediately suspending tariffs on US and UK distilled spirits as they negotiate an agreement to simultaneously eliminate retaliatory tariffs on distilled spirits, which will benefit the struggling hospitality businesses on both sides of the Atlantic.”